Hydrogen: A magic pill or magic bean?

The Government is being accused of indulging a ‘Jack and the Beanstalk’ energy fantasy. David Williams reports.

With the election won and her Cabinet named, Jacinda Ardern laid out her economic priorities.

The country needs – and has – a strong plan, the Prime Minister told a business audience in Auckland earlier this month, “one that preserves our hard-won position, makes the most of the opportunities that do exist and, very importantly, one that brings people with us”.

A particular focus, Ardern said, was on sustainability and pursuing carbon neutrality, in both the public and private sectors. She spruiked the business case being done for a pumped hydro-electricity dam at Otago’s Lake Onslow, and the exploration of opportunities in the struggling biofuels sector.

New Zealand was also working on its “hydrogen road map”, she said, with a focus on “domestic freight use and as a potential export market”. This continues the previous Government coalition’s love affair with hydrogen, which is clean energy but energy-intensive to manufacture.

Last year – so, before the post-Covid lolly scramble of taxpayer dollars – Energy Minister and Labour MP Megan Woods launched a green paper for a national vision for hydrogen, “one of the potential tools” to reduce greenhouse gas emissions.

In March, before the national lockdown, $20 million from the provincial growth fund was awarded to a joint venture project between New Plymouth company Hiringa Energy and Ballance Agri-Nutrients to produce hydrogen at Kapuni, South Taranaki, using wind turbines to power an ammonia-urea factory.

Then, a few months ago, Woods and Climate Change Minister James Shaw, the Green Party co-leader, announced a $20 million investment for Hiringa to build a network of hydrogen fuel stations – a project estimated to cost $69 million.

Costly endeavours

Research has been another winner. In the 2020 Endeavour Fund round, GNS Science won $8.45 million for a five-year project, “Powering NZ’s green-hydrogen economy: Next-generation electrocatalytic systems for energy production and storage”.

There’s a lot to like about hydrogen, particularly in a country with abundant electricity generated from renewable sources. When used to power vehicles, its exhaust is water vapour.

As Ardern mentioned, there’s a likely export market for it. Japan seems particularly keen, and to that end Japanese company Mitsui & Co has signed a strategic alliance with Hiringa.

New Zealand isn’t alone in making investments in hydrogen.

The Australian government is starting to open its wallet to the industry, which, it’s said, could attract $A70 billion of investments over the next decade.

One striking project is being pitched as the world’s biggest wind-and-solar power generator in West Australia, to generate ammonia for export. Within five years, the $A36 billion power station is expected to have 1600 wind turbines and 78 square kilometres of solar panels.

Other countries throwing billions at the industry include Germany, Japan, South Korea and Canada. American company Air Product & Chemicals announced a $US5 billion joint venture to build an ammonia megafactory, powered by four gigawatts of wind and solar, in Saudi Arabia.

Concerns over climate change appear to be fuelling a global race.

On one hand, New Zealand might be foolish to miss out, but on the other, why would we spend money when the hard work will be done by bigger countries? (Perhaps the urgency of climate change shifts that dynamic, somewhat.)

But, fundamentally, should governments of small countries pick winners and losers? Why not let the market decide?

Hydrogen fuel cell technology has been around for decades but still structural problems remain: the high cost of vehicles, the inefficiency of converting power into kilograms of hydrogen, and, in a related point, the huge amount of renewable electricity required to create enough gas to structurally shift our economy. Some are warning this effort, and expense, of pursuing hydrogen just isn’t worth it.

In summary, is hydrogen a magic pill or a magic bean?

Susan Krumdieck, a University of Canterbury professor who’s leaving for Scotland, coronavirus-permitting, is firmly in the magic bean camp. Yes, that’s a reference to the fairy tale Jack and the Beanstalk.

To recap, Jack and family reached rock bottom and had to sell the cow. Instead, Jack trades the cow for magic beans which grew and grew into the clouds, reaching a kingdom of giants.

“That problem of when you have to make hard choices and the magic beans sound like such a good idea,” Krumdieck summarises. “You think you’re getting a good deal, or you’re doing the right thing.”

It’s time to sell the cow, she says – build smarter cities, and use less energy. “I know it’s hard, nobody wants to do it, but it’s the thing that needs to be done.”

The job of a hydrogen fuel cell is to take chemical energy – hydrogen and oxygen – and convert it to electric energy. Oxygen is plentiful but what the cell needs is a supply of hydrogen gas.

The power used to manufacture the gas is important: if coal or gas-fired electricity is used you’ll pump out more greenhouse gas emissions. Water electrolysis – which can be done by various methods, including industrial waste heat – uses electricity to split its elements: hydrogen and oxygen. Use renewable power for that process and it’s called “green hydrogen”, because it’s emissions-free.) There’s also brown, grey and blue hydrogen.

Once hydrogen’s produced it must be cleaned, dried and, if necessary, compressed for storage, then transported. (Another way to store hydrogen energy is by producing ammonia, which has three hydrogen molecules and one nitrogen molecule.)

The inefficiencies are obvious. Electricity is used to produce hydrogen and compress it, and more energy is needed to transport it before it’s converted back to electricity. Roughly a third of the energy used to manufacture hydrogen makes it into the fuel tank. In all-electric vehicles, the efficiency’s about three-quarters.

Hopes are still high for hydrogen, however. Even the Intergovernmental Panel on Climate Change (IPCC) says hydrogen could play a considerable role as a substitute for fossil-based, non-electric energy demands, as the world races to make deep cuts in greenhouse gas emissions by 2030 to try and limit temperature rises on pre-industrial times to 1.5°C, or, at worst, 2°C.

In this country, the Green Party is pushing for a hydrogen system, particularly to fuel for heavy trucks. Pre-election, Climate Change Minister James Shaw said trucks comprise about 2 per cent of the transport fleet but about 20 per cent of emissions. (Ministry of Transport data say that’s more like 27 per cent.)

“You can get quite big wins quite quickly,” Shaw says.

Hiringa Energy chief executive Andrew Clennett, of New Plymouth, says there are just a handful of electrolysers of decent size in the country, generally for in-house industrial processes, like at pulp and steel mills. None of them are Hiringa’s.

“Our ones are all in the final design and we’re just getting into ordering the kit to install – it’s not installed yet,” he says. “We’re planning to install a whole number for our projects across the North Island and into the South. We’ll have eight installed through next year and then another six in 2022.”

By the end of 2025, Hiringa wants to have 24 stations, covering the main freight routes and hubs for big fleets, like dairy trucks. That’s a tiny amount of the country’s more than 1200 retail-supported stations – or 1300-odd if you include unmanned sites.

The first stations might only produce 400kg a day, with capacity, initially, for 800kg daily.

Without fuelling stations there aren’t any hydrogen trucks, either.

TR Group, which has a partnership with Hiringa, has committed to buying the 20 trucks from Hyzon to be rented and leased, Clennett says. The first four should be in operation in the third quarter of next year. (Replacing a diesel truck with a zero-emissions one is like taking 150 cars off the road, in emissions terms.)

How will it afford this?

Capital for its infrastructure will primarily come from core investors (including Warehouse founder Sir Stephen Tindall’s investment vehicle K1W1 Ltd) and infrastructure partners, such as Waitomo, which will host hydrogen at its truck stops. Hiringa’s working with other major companies, but Clennett says, “I’m probably not really in a position to talk about that.”

The taxpayers’ double-investment for fuel stations and the Kapuni plant will help, says Clennett, who argues the government has a role, initially, in helping to create a level playing field for hydrogen against fossil fuels. “The scaling up of this, we certainly don’t anticipate we’ll need any capital stimulus from the Government.”

(There is a case, however, for lawmakers to exempt hydrogen fuel cell vehicles from road user charges, at least temporarily, as battery electric vehicles are, to spur their uptake.)

He does mention, however, regional and local councils as potential business partners for local projects.

Adding to the capital costs of green hydrogen projects is a push for on-site renewable energy, so they’re not reliant on the national electricity grid. For example, most of the cost of the $50 million Kapuni project with Ballance will go into building four wind turbines to power the electrolyser, which, itself, will cost $10 million to $12 million. (The hydrogen produced at Kapuni will be used to power Ballance’s ammonia-urea plant, and also produce transport fuel.)

Clennett’s pitch about hydrogen is “scale”. He mentions the word 25 times during our interview.

Expanding the number of electrolysers helps the economics of hydrogen, he explains. “It’s all about scale – you have to bridge that scale, and achieve that scale, to get those costs down. It’s a classic technology and scale problem.”

Hiringa needs friends to give hydrogen that scale but, right now, they seem hard to come by.

Ports of Auckland announced two years ago it would build a hydrogen and refuelling facility, but resource consent was only granted in September, and Covid-19 has delayed delivery of key components. “We are now unlikely to have the plant operating until 2021,” the Auckland Council-owned company’s annual report says.

Last year, NZX-listed Refining NZ investigated the potential of producing green hydrogen at Marsden Point. Ellie Martel, the company’s government and external relations manager, says: “The conclusion of this work was that it was not economically feasible to shift the refinery to green hydrogen production.”

Let’s delve into the numbers.

Clennett says the Kapuni electrolyser will be able to produce 2000 to 3000 kg of hydrogen a day, where one kilogram of gas is equivalent to about 10 litres of diesel. That’s equivalent of about 20,000 litres of diesel a day. “It’s fairly material.”

(Compare that to a massive plant in Saudi Arabia is expected to produce 650 tonnes of green hydrogen a day, enough to run about 20,000 buses. In America, there are plans to turn underground salt caverns in Utah into a renewable energy reservoir, with enough gas to power 150,000 homes for a year.)

Tank capacity on hydrogen fuel cell trucks is between 40kg to 70kg, he says, so taking an average of 50kg, that’s enough to power 40 trucks.

What’ll it cost to fill up? Tapping can be heard on the other end of the phone. About $600 to $800, Clennett replies.

A hydrogen-fuelled truck is also more expensive to buy – “about twice the cost of a diesel truck right now”.

Some are more costly. In America, a Nikola Motors’ Class 8 rig, which will go into production in 2022, is expected to cost $US375,000. Compare that to an all-electric Tesla Semi with a 500-mile range, costing $US180,000, and a comparable diesel truck worth about $US120,000.

Clennett would rather frame hydrogen-powered trucks by total cost of ownership – combining the initial outlay with running costs over the vehicle’s life. He reckons there’s about a 30 per cent premium for hydrogen over diesel right now.

Bullishly, Clennett predicts hydrogen and diesel will be on a par by 2026 or 2027, which will be a “tipping point”. That’ll accelerate the take-up of fuel cell trucks, as companies look at replacing their diesel fleets. “We’re out to beat diesel.”

The global interest in hydrogen will surely push costs down. But consulting firm Wood Mackenzie estimates it will still take until 2040, on average, for green hydrogen production to achieve cost-parity with fossil fuels – earlier for countries like Germany.

Big New Zealand companies, which could tip the scales for hydrogen here, aren’t yet convinced.

Fonterra is New Zealand’s biggest company and the world’s biggest dairy export company. It’s also one of the country’s biggest coal users.

Chief operating officer Fraser Whineray says in an emailed statement it’s monitoring progress of hydrogen and electric trucks. “We are ‘fuel agnostic’, in that we’re looking for low-carbon solutions that are suitable for New Zealand conditions and are watching the development of this technology with interest.”

As for its coal-powered factories, Whineray says low-emission energy will require significant investment. “We would not look at opportunities for hydrogen use in isolation but rather look at a combined range of options.”

Don Braid, the veteran managing director of one of New Zealand’s biggest freight companies, NZX-listed Mainfreight, is more blunt.

“From the research we have seen and heard, hydrogen at this stage is too dangerous, too impractical, too hard to distribute for consumption, and the conversion for trucks is extremely expensive,” he says via email. “Needless to say we won’t be at the bleeding edge in development.”

The rush to 2030

There’s another way to see hydrogen’s utility: through a climate lens.

The IPCC says to keep temperature increases to safe levels, carbon pollution needs to drop 45 per cent drop in carbon pollution, on 2010 levels, by 2030. New Zealand has its own 2030 target, under the Paris Agreement – a 30 per cent reduction below 2005 levels.

All countries are in a rush – on paper, at least – to decarbonise. How much will hydrogen help?

Decarbonising industrial emissions, like at Kapuni, is a good start, but will producing the gas shift the needle for heavy transport emissions? Not quickly, it seems.

Hiringa’s predicting by 2035 – five years after that crucial 2030 date – it’ll have 20,000 hydrogen trucks on the roads. By then it will have removed about 10 million tonnes of carbon dioxide equivalent gases. That sounds impressive, until you realise the national fleet stands at about 150,000 trucks.

By 2050 – when the country has promised to be carbon “net zero” – as costs of hydrogen production are predicted to fall further, that will rise to 64,000 vehicles.

(A little reality check, here. Shaw, the Climate Change Minister, said before the election if the Government adopted all the Green Party’s pre-election policies, including on transport, he’s not sure the country’s emissions would drop in this Parliamentary term. “There’s a lag time.”)

Clennett clarifies decarbonising New Zealand is the top priority for hydrogen, while exporting fuel is a “long-term play”.

Yes, the country will need to build more renewable energy generation to increase hydrogen manufacturing, but the numbers are absolutely achievable, he says – “the economics of hydrogen will enable that”. “You can’t have something for nothing,” he adds.

“We’re very, very bullish. A team of 17 here now, building and doing detailed design, and, you know, all the sites. And so, yeah. We’re full-on up to our eyeballs in making this happen.”

Krumdieck, the University of Canterbury academic (who Clennett puts in the “hater camp”), argues the rationale for hydrogen isn’t there – “hasn’t ever been”.

She knows hydrogen, having researched it in her native United States – “I’ve got patents on fuel cells” – and supervised two PhD students conducting hydrogen research in New Zealand. She’s certain it won’t work, not because of technical difficulties, but because of logic. It’ll take a huge amount of new renewable electricity to make enough hydrogen to power our transport fleet, she says.

“We would need four more South Islands of New Zealand to do exactly the same thing we’re doing right now, with hydrogen.”

What does she mean? Well, by the time you make hydrogen, compress it, store it, transport it, and then put it through a fuel cell to make electricity, you’ve wasted a whole lot of energy. “You need four times the generation capacity to get the same amount of electricity.”

EnergyWatch, the journal of the Sustainable Energy Forum, compares using hydrogen as an energy carrier to “using kauri as firewood”. Its April edition compared hydrogen to: coal or natural gas as an electricity supply back-up; lithium-ion batteries for “peak-shaving” energy storage; battery and hybrid-petrol vehicles.

“None of these comparisons indicate a useful role for a hydrogen economy in NZ in the foreseeable future.” (The journal also says exporting hydrogen is a “pipe dream” which “doesn’t stand up to rational analysis”.)

Maybe we don’t need more energy, Krumdieck says. Perhaps we can rebuild the 40-odd-per cent of our homes that are “class-A crap”, make them more energy-efficient, and use less power. “Which would make us healthier and more comfortable anyway.”

Instead of spending millions researching hydrogen, maybe research could find better ways to build or rebuild more efficient houses. (Krumdieck has written to Energy Minister Woods, pleading for the Government to drop hydrogen funding: “Let’s get on with the stuff that we really can do that will really make our economy work.”)

Time for transition

Big problems need funding, research, and creativity. A concerted effort in what she calls “transition engineering”. Changes that not only make economical and profitable, but are socially equitable.

The number one requirement is to ensure houses are in a walkable place. “My house is a 15-minute walk from the University of Canterbury, 10-minute walk from schools. I’m in the urban form. So this house is worth re-modelling.”

Our leaders need to look at their towns the same way you’d look at your house, she says, figuring out the energy needed for it to flourish, with new tools and doing things differently.

Look at cars – a Kiwi’s sacred cow. “We spend something like close to $40,000 a year per household per car – it’s insane how much we spend,” Krumdieck says. “We import them, we employ other people to make them and get the replacement parts for them.”

Not to mention imported fuel, and the money spent building and resurfacing our roads.

“We could be paying our own people to make bicycles and trams and trains, and running them off our own electricity. Making our own, say, urban golf cart sort of things for when you need to carry stuff.”

Have we not learnt from Covid? It’s amazing what we can do from our own neighbourhood. What if our streets weren’t clogged with people in utes driving their kids to school?

Then, Krumdieck says, we could all get around on electric bikes, cities could lay electric tram systems, and head towards achieving zero-emissions.

“And it has nothing to do with hydrogen or carbon capture and storage,” she says. “It has to do with new jobs, new industries, new engineering, and figuring out how to lay out that city so that you know it will all work.”

Using less energy means spending less time in traffic. You become more productive and you can claim back that time. Cities can spend less of your rates money on roads. This re-wiring of our cities is what young people feel they need to do – “recolonise the land of their forefathers into the thing that will work in reality”.

“Some of it is about building the right kind of housing in the right kind of place. Connecting that up with new kinds of retail, new kinds of markets, new kinds of distribution of goods.”

It’s engineering the transition to a post-oil world. Imagine being the first country in the world to declare that as its goal, Krumdieck muses. “That, I think, is more interesting than magic beans.”

This story was originally published on NEWSROOM  and is republished with permission.